Government Rejects Flipkart’s Plans Due to Foreign Direct Investment

India’s E-Commerce giant Flipkart was planning for retailing food and was looking to source directly from farmers and goods that are locally produced. This plan to get into online food retailing has been rejected by the government.

If media reports are to be believed, the behind this are said to be related to regulatory guidelines. According to these reports, the Department for Promotion of Industry and Internal Trade (DPIIT) explained to Flipkart that with 100 percent foreign direct investment (FDI), it cannot operate in India in food retailing business.

Flipkart created a new entity called Flipkart Framemart Private Limited& investment of $258 million has been authorized for this venture. This entity was also created with regulatory laws compliance.

The plan was to source goods that are locally manufactured and directly from farmers. The Flipkart spokesperson said in response that they intend to re-apply & are evaluating department’s response.

Companies like Amazon, Zomato, and Grofers already secured approval from government, because earlier govt. permitted 100 percent FDI in food retail business. These guidelines have been revised by the government to make clear that no inventory led operation can be done & third party sellers can only transact in food retail.